Dave Ramsey: Save up, or get a mortgage?

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May 15, 2018 at 2:10 PMMay 15, 2018 at 2:14 PM

Dear Dave,

Iím 28, single, and I just became debt-free. In addition, I make $70,000 a year and have the equivalent of six months of expenses set aside for emergencies. Should I save up to pay cash for a house, or is mortgage debt okay? Iíd like to keep the price of a new home between $200,000 and $225,000. Since I currently live in a nice apartment, I think I can save about $20,000 a year. What do you think?

ó Kathryn

Dear Kathryn,

It sounds like youíre in great financial shape. Congratulations on becoming debt-free.

Letís take a look at both scenarios. If you can save $20,000 a year, that means youíre about 10 years away from a nice, paid-for home, and youíre still debt-free. Thatís one option. At the same time, I donít yell at people for taking out a 15-year, fixed-rate mortgage, where the payments are no more than 25 percent of their monthly take home pay. In this situation, you could save like crazy for a couple of years and make a big down payment on a home in the price range youíre talking about. Then, you could pay off that house in just 15 years.

I honestly donít have a problem with either solution, Kathryn, but think about this. Wouldnít it be great to have your own home, and still be completely debt-free, at 40? Itís something to think about.

óDave

Stand up to them

Dear Dave,

A debt collection agency started calling my office a few weeks ago. I gave them an initial payment, and made an agreement to pay off the debt in monthly installments. This morning, they started calling me at my office again wanting payment. Can I legally demand they not call me at my place of employment?

ó James

Dear James,

Absolutely. You have a legal and moral obligation to pay your debts, and Iím glad this is something you recognize. But collectors have rules they must follow. Theyíre governed by law just like everyone else.

Be certain to keep your end of the agreement. Make your payments on time, or early, whenever possible. Then, if they call you at work again, remind them of your initial payment and the terms of the agreement already in place. Be polite, but firm, and demand that they never call you at your office again.

In addition, send them a certified letter, return receipt requested, so youíll have proof you sent the letter and they received it. In the letter, let them know that ó according to guidelines set forth in the Federal Fair Debt Collection Practices Act ó you are demanding they not call you at your office again.

If they call you there after receiving this formal demand to stop, theyíll be in violation of federal law. If that happens, let them know youíll talk to a lawyer and sue them.

ó Dave

ó Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.